Flickr user Russel Davies
Taking on student loans can be intimidating, especially when you think about how much student debt there is. While being saddled with student loan debt for up to 30 years can happen, it’s not the norm despite what you may hear. With some smart choices and strategic planning, you can actually pay off all your loans within a few years of earning your bachelor’s degree. Taking on student loans doesn’t have to be a 30 year sentence. Here’s how.
Maximize Financial Aid
The less you have to take out in student loans, the better. Start by going after scholarships, grants, work study programs, and other forms of institutional and outside aid before you even consider loans. Gift aid doesn’t have to be paid back. In the same vein, file the FAFSA, even if you don’t think you qualify for any aid! You never know what kind of merit-based scholarships and grants you’re missing out on if you don’t file the FAFSA.
Federal Loans First
You can clear your entire student loan debt even faster if you take on only federal student loans. This is because federal student loans have much lower interest rates compared to private loans, and they also offer borrowers several different repayment plans to suit their unique financial circumstances. Additionally, you may even qualify for student loan forgiveness programs. You can only get federal loans if you file the FAFSA, so make sure to do so!
Finding the Right Repayment Plan for Student Loan Debt
The standard repayment plan for federal loans sees you repay your debt within 10 years. There are other plans that can extend 15 or 20 years, but you can also pay off your loans much sooner than that. Either way, make sure you do plenty of research into which repayment plan works best for you and your financial / career situation. If you can comfortably pay off your loans in less than 10 years, absolutely pay it off faster. If you find yourself struggling to make your current monthly payments, consider lowering your payments and extending your loan.
Paying Back While in School
One way that you can pay off your loans faster is by making small payments while you are still in school. Every little bit helps. Even if you choose to make interest-only payments while you are in school, your overall debt will reduce considerably by the time you graduate.
Federal Student Loan Consolidation
Another way you can get out of debt faster is by keeping track of market conditions and prevailing lending interest rates. If you consolidate or refinance your student loans at the right time, you will benefit from getting a new loan at a lower rate of interest. This will reduce the amount you pay by way of interest, helping you become debt-free much faster. Just keep in mind, any benefits or perks you have from your federal loans will be lost when you consolidate or refinance.
Want to pay your student loan faster? Check the strategies you can use to accelerate your progress.
